Renting: LLC or No LLC

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I would like to start off by saying I'm glad I found this forum. Now my question. I am in the process of becoming a real estate investor but at the moment my wife and I want to rent out a condo she owns. We just got married. It's a beautiful condo on the water here in Miami where everything is tanking so we can't sell it yet. I want to create a LLC and put this condo under the LLC since it won't be our primary home anymore. She doesn't feel the need to create an LLC since she knows people who just rent their places out. What are the pros and cons of renting a condo out without a LLC compared to doing it with a LLC?

Thanks!

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Originally posted by "MiamiREI":

At the beginning no one has alot to cover as far as assets go. Ok, most people. Even though I don't have much at the moment I still feel like I should protect this condo since it's an expensive condo. I know people love to sue for no reason. They'll always find something. I don't get it when people say you should wait until you have more assets. Why not cover yourself from the beginning? It doesn't cost much to start a LLC. Either way, if you get sued, you'll need a lawyer.

1. A high end condo that is 100% mortgaged is not much of a target. If a lawyer takes on the case and sues you they will not be able to recover anything as the bank has a prior claim.

2. Use an umbrella policy to cover your exposure. When an insurance company stands to lose a lot they will get a good lawyer to fight your cash or settle with their cash.

3. While it is a bad idea to wait until after there is a problem letting the liability concerns get in front of creating wealth is a bad idea. You really can not protect that which is not your assets. You also will find that liability protection comes with costs and hurdles (loans in the name of an LLC are difficult to organize). Hence you have to be pragmatic.

4. It is human nature to misunderstand risks. Fooled By Randomness covers the topic. People fear plane crashes but not driving even through they are more likely to die in the car than the airplane.

Liability from suits related to being a landlord is real. How real and who you should react is the key. Get Creating Wealth by Bronchick to get perspective and then some ideas for what you should do. It costs about $14.00 on Amazon so high return for low cost.

John Corey